Omnicom Group Inc. (OMC)

OMC 
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Omnicom Group (OMC)

Q3 2012 Earnings Call

October 16, 2012 8:30 am ET

Executives

Randall J. Weisenburger - Chief Financial Officer and Executive Vice President

John D. Wren - Chief Executive Officer, President and Director

Analysts

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Craig Huber

Tim Nollen - Macquarie Research

John Janedis - UBS Investment Bank, Research Division

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

David Bank - RBC Capital Markets, LLC, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

Matthew Chesler - Deutsche Bank AG, Research Division

Daniel Salmon - BMO Capital Markets U.S.

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Omnicom Third Quarter 2012 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I'd now like to now introduce you to today's conference call host, Executive Vice President and Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger. Please go ahead.

Randall J. Weisenburger

Good morning. Thank you for taking the time to listen to our third quarter 2012 earnings call. We hope everyone had a chance to review our earnings release. We posted to our website both the press release and the presentation covering the information that we'll be presenting this morning. This call is also being simulcast and will be archived on our website.

Before we start, I've been asked to remind everyone to read the forward-looking statements and other information that's included on the last page of our investor presentation. And to point out that certain of the statements made today may constitute forward-looking statements and that these statements are our present expectations, and actual events or results may differ materially.

I'd also like to remind you that during the course of the call, we will discuss some non-GAAP measures in talking about Omnicom's performance. You can find a reconciliation of those measures to the nearest comparable GAAP measures in the presentation materials.

We're going to begin the call with some brief remarks from John Wren. Then following John's remarks, we'll review our financial performance for the quarter, and then both John and I will be happy to take questions.

John D. Wren

Good morning. Thank you for joining us on the call. We are now 3 quarters through 2012, and I'm pleased to say that our performance over the quarter and for the year-to-date remains strong.

Let me start by talking through some of the key points driving our business results and strategies, and then I will provide some perspective on the larger business environment.

The third quarter was another solid quarter for Omnicom and our companies. Our broad geographic footprint, diversified expertise and emphasis on creative excellence has benefited both our clients and our shareholders. For the quarter, we continue to generate solid organic growth, particularly in light of the macroeconomic environment. And our margin performance remained strong, keeping us on track to achieve our margin objective for the year.

Before getting into the specifics of our third quarter performance, I'd like to spend a few minutes discussing the strategies that have allowed us to continue to achieve consistent results: First, our investment in the best talent; next, expanding our footprint geographically and in new service areas; also expanding our digital, analytical and consumer insight capabilities; and finally, an increasing coordination of our service offering on our top 50 clients.

A few weeks ago, we returned from the Spikes Advertising Festival, Asia's most prestigious creative awards show where 30 different Omnicom agencies won a record 117 awards, including first and second prize for Network of the Year by BBDO and DDB. This performance significantly outpaced our competition. I think this recognition is important in illustrating how the different components of our strategies come together to benefit our clients. It also shows our progress in growing our portfolio geographically to include what we believe are the most effective and creative agencies in the Asia Pacific region.

Expanding in developing markets will continue to be a core strategic focus of Omnicom. In the third quarter, our revenue outside the U.S., U.K. and Eurozone accounted for almost 24% of our top line.

We also know that our success is increasingly being supported by what goes on behind the scenes in our networks and agencies. Across many of our clients, but especially for our top 50 clients which are served by multiple agencies in our group, our people are collaborating more closely to share insights and ideas and increasingly working together to achieve common objectives. These collaborations are successful because they bring together our top talent from different agencies to provide integrated solutions across brands, disciplines and geographies.

Collaboration and coordination across our agencies is even more important today in servicing our major clients as many of them are seeking to consolidate their advertising and marketing spend across a smaller group of agencies.

Overall, we have been successful in gaining a greater share of business in these consolidations while providing clients more integrated services and operational efficiencies.

We're also benefiting from stronger digital capabilities within our agencies and from our increased focus on using data and analytics to generate valuable insights and drive results. As I have said before, the industry is only at the beginning of learning how to use these new technologies to effectively communicate with consumers. And these new technologies are changing quite rapidly, requiring us to continually change and adapt.

While each of our agencies is developing digital and analytical skill sets, we are also increasingly leveraging our investment in Annalect. Annalect, which includes our search business, resolution media, our mobile and display businesses, now has over 600 employees servicing clients in more than 30 markets around the world.

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